Latest / Felix Nikolas Prehn's Podcast / Felix Prehn - I have exciting (and terrible) news + Stock Market News 25 September 2024

Transcript

Felix Prehn - I have exciting (and terrible) news + Stock Market News 25 September 2024 · Felix Nikolas Prehn's Podcast

• 0:03
  Speaker 1: Felix, good morning to you on this glorious day in the markets.
• 0:07
  Speaker 1: Well, maybe not that glorious.
• 0:09
  Speaker 1: So, yes, a scary headline, apparently a demon-like thumbnail.
• 0:13
  Speaker 1: Let me walk you through the bad news and then we round it up with the silver lining, because there is a definite silver lining here.
• 0:20
  Speaker 1: But I think there's some things we better be aware of so that you make better decisions, especially this September and this October, but also going into really the rest of the year.
• 0:29
  Speaker 1: So not doom and gloom, just wanting to make you aware of what's happening out there, so you are the best informed investor ever and you can make more money than ever, which is really our goal Must be those electrolytes.
• 0:44
  Speaker 1: Good morning everybody.
• 0:46
  Speaker 1: If you have any questions, of course, pop them into the chat after you've destroyed the like button, and then I will do my best to answer your questions.
• 0:52
  Speaker 1: We can run through all your favorite stocks and everything else first as well.
• 0:55
  Speaker 1: But let's get cracking with what's actually happening here.
• 0:58
  Speaker 1: One just digest the Fed cuts.
• 1:01
  Speaker 1: We're still doing that and that's important because that's the thing that's going to drive the market till year end.
• 1:07
  Speaker 1: Certainly, when you get that 50 basis point cut, especially when that's the first one, it's a bold move.
• 1:14
  Speaker 1: It's kind of aggressive.
• 1:15
  Speaker 1: Well, usually they do that if they think the economy is going to slow down or the recession risk is going higher.
• 1:26
  Speaker 1: So, if you go into 2001, which is basically when I started investing in about 1999, it was a great time to start investing fall flat on your face.
• 1:35
  Speaker 1: Initially, we had a rally after the cut and then eventually we got, you know, that massive tech recession.
• 1:43
  Speaker 1: Eventually, we got that massive tech recession.
• 1:46
  Speaker 1: Look at 2007.
• 1:47
  Speaker 1: The Fed cut by 50 basis points to inject liquidity into the banking system and immediately, well, the stock market went up.
• 1:56
  Speaker 1: They liked it and then, of course, 2008 happened and the world froze over.
• 2:02
  Speaker 1: Look at 2019.
• 2:03
  Speaker 1: They cut rates in July because they thought the economy was slowing down.
• 2:09
  Speaker 1: Initially, the market rallied and well, basically, it's trying to make the point that the Fed tends not to do this unless it thinks things are slowing down and they're typically too late with the actual cut.
• 2:28
  Speaker 1: There's something to bear in mind.
• 2:31
  Speaker 1: But let's walk through a little bit more data.
• 2:33
  Speaker 1: This is just out the US Consumer Confidence Index, and, yes, this matters.
• 2:39
  Speaker 1: There are two parts to the index and again, the Muppet who made the chart had the colors blue and blue at his disposal.
• 2:46
  Speaker 1: So the top line here is they asked how do you evaluate your present situation?
• 2:53
  Speaker 1: Are you more or less confident?
• 2:54
  Speaker 1: And well, they are definitely a lot less confident in the present situation, so they think things have turned worse.
• 3:03
  Speaker 1: If you ask them about the future, they're sort of saying well, the future is kind of looking the way it's looked for the last two years or so.
• 3:11
  Speaker 1: We don't really see much of a change.
• 3:13
  Speaker 1: So the future is looking all right, but the immediate present not so much, which of course, is concerning because people might slow down their spending a little bit, just like people are slowing down the like button destruction on this particular video for some reason.
• 3:28
  Speaker 1: And what isn't slowing down, of course, is our portfolio.
• 3:32
  Speaker 1: We keep making money.
• 3:33
  Speaker 1: We're up 93% so far this year, literally 93%.
• 3:38
  Speaker 1: We do that in a couple of hours a week.
• 3:39
  Speaker 1: And some of you are saying, felix, why is not number changing?
• 3:42
  Speaker 1: Because I have done very little this September and I intend to do very little this September.
• 3:45
  Speaker 1: These are our only open trades at the moment.
• 3:48
  Speaker 1: This is a small $30,000 teaching portfolio and we are not using all that money right now.
• 3:53
  Speaker 1: We're up another 800 bucks or something and I'm not doing anything.
• 3:58
  Speaker 1: Basically Very, very little, and I know some people find that frustrating.
• 4:01
  Speaker 1: But the biggest lesson is do nothing unless there's a glorious opportunity.
• 4:08
  Speaker 1: We also ran today the first day of our beginner trading challenge, which was a tremendous fun if you joined us for that.
• 4:15
  Speaker 1: So today it was yesterday, wasn't it?
• 4:16
  Speaker 1: Day two is today, initially in 11 hours, and what have we got coming up today for that?
• 4:23
  Speaker 1: Well, we're actually going to do the live trading part, the actual executing the trades part.
• 4:28
  Speaker 1: So if you missed the first day, you can still join us for the second day.
• 4:31
  Speaker 1: I'll run you through our trading rules and the actual trading with your Q&A, so you kind of get the juicy stuff.
• 4:38
  Speaker 1: So go and grab yourself a free seat at felixfriendsorg challenge and you can still join us here for that.
• 4:47
  Speaker 1: But let's just go back to the consumer confidence thingy-ma-jiggy for a moment, because that obviously just being out matters.
• 4:54
  Speaker 1: We've had the largest drop since August 2021.
• 5:02
  Speaker 1: Kind of significant right, that's a pretty big long time period since we've had that kind of a drop.
• 5:08
  Speaker 1: So the consumer is definitely getting a little bit antsy and I've been saying to you for, I think, best part of 2024, be careful with consumer discretionary stocks, be careful with retail stocks.
• 5:21
  Speaker 1: You know your Nikes and Macy's and that kind of thing, because I think they might struggle.
• 5:28
  Speaker 1: Dark Forest got a Durex advert.
• 5:31
  Speaker 1: Dark Forest, you do realize these adverts are personalized, right.
• 5:39
  Speaker 1: It shows probably more about your browsing history than it does about YouTube, which is interesting.
• 5:41
  Speaker 1: So there is something else that we just got out as part of this consumer confidence data.
• 5:49
  Speaker 1: There is something called the labor differential index, and this is something you can explain today to your friends.
• 5:56
  Speaker 1: You'll have none left after you've done it.
• 5:59
  Speaker 1: What is it?
• 6:00
  Speaker 1: It's the difference between the people who say that jobs are plentiful and those who say jobs are hard to get.
• 6:08
  Speaker 1: And right now, people are very, very, very much trending towards the hard to get camp rather than lots of jobs up here.
• 6:20
  Speaker 1: So we are moving in the wrong direction, in a sense of there are less jobs available.
• 6:27
  Speaker 1: And you might think, well, that's a survey.
• 6:30
  Speaker 1: Who cares?
• 6:30
  Speaker 1: Well, there's some hard data here as well.
• 6:32
  Speaker 1: There is the US quits data.
• 6:35
  Speaker 1: So that's people who just go working in a cubicle.
• 6:39
  Speaker 1: That's not how we're meant to spend our life.
• 6:41
  Speaker 1: So I quit.
• 6:42
  Speaker 1: See ya, it'd be nice if that was the motivation.
• 6:45
  Speaker 1: For most people that isn't necessarily the motivation, but quits are dropping.
• 6:52
  Speaker 1: When do people quit their job?
• 6:55
  Speaker 1: Like up here, lots of people are quitting their jobs when it's really easy to get another job, maybe at a higher pay rate.
• 7:01
  Speaker 1: Right now, we're kind of back to well long-term average, really back to sort of 2005 and 2006 levels here, so the job market's definitely definitely softening, no matter what the government tries to tell you about it.
• 7:27
  Speaker 1: Dawn is asking about what part of Amazon is consumer discretionary.
• 7:30
  Speaker 1: Well, amazon is an interesting business.
• 7:34
  Speaker 1: So if you look at I like that, you are leading me down a sidetrack here.
• 7:38
  Speaker 1: Amazon, if I remember this correctly I might be slightly off here Something like 40% of profit is AWS cloud.
• 7:50
  Speaker 1: About 40% of profit is ads okay, and I think something like 20% and I'm probably slightly off on that, but it's some sort of proportion like that of profit is e-commerce.
• 8:04
  Speaker 1: So the e-commerce business makes a lot less money than the ads business, which, of course, is related to the e-commerce business, so I don't think it matters that much.
• 8:13
  Speaker 1: Plus, people buy a lot of like groceries and repeat items from there that they actually need, like stuff that's just required rather than just televisions and stuff that they might put off.
• 8:24
  Speaker 1: So I don't think it hits Amazon all that hard.
• 8:26
  Speaker 1: They're pretty diversified and they also, of course, have subscription revenue from you on top, which means you're more likely to buy it from them than from anybody else.
• 8:35
  Speaker 1: So I appreciate the interesting question there, dawn.
• 8:40
  Speaker 1: Now, I said we had some good news, right, we have some good news.
• 8:44
  Speaker 1: There is trillion dollar good news out there and few people really understand it, and I thought this chart was so confusing it's worth showing to you, just to like befuddle you completely.
• 8:56
  Speaker 1: Okay, basically, it shows how much money is in money market funds, which is essentially money in debt right, money in bonds, which is essentially money in debt right Money in bonds.
• 9:06
  Speaker 1: And since 2019, since the insanity that was COVID the government printed all that money $4 trillion.
• 9:15
  Speaker 1: Well, about a trillion dollars of that ended up in money market funds, surprise, surprise.
• 9:22
  Speaker 1: So that increase is likely to get undone.
• 9:28
  Speaker 1: Now, what happens is that when rates come down, bonds are less appealing because they pay less interest, but there is a lag.
• 9:40
  Speaker 1: So in the early 2000s, there was a one-year lag and then in 2008, when rates came down, there was a two-year lag for that money to leave the money market funds.
• 9:54
  Speaker 1: Now, why the heck do we care about money market funds?
• 9:56
  Speaker 1: Sounds boring, doesn't it?
• 9:57
  Speaker 1: Because this money is going to go where it's going to go into stocks.
• 10:02
  Speaker 1: But it won't happen this week or next week or next month, or necessarily even 2025.
• 10:08
  Speaker 1: But it'll happen.
• 10:10
  Speaker 1: And if you, why is there a load icon above Felix, is there?
• 10:15
  Speaker 1: That's kind of interesting.
• 10:16
  Speaker 1: He's AI, apparently.
• 10:19
  Speaker 1: Yes, it'd be quite fun, wouldn't it, if I was AI.
• 10:21
  Speaker 1: Tallulah, am I AI?
• 10:23
  Speaker 1: There's a cat sleeping under my desk.
• 10:25
  Speaker 1: So this does really matter and it just means that if you have a little bit more of a medium term outlook, you can make some rather bullish predictions on that.
• 10:34
  Speaker 1: And here is the explanation.
• 10:35
  Speaker 1: I think this is from Goldman's and they're saying we often hear the question where will this almost trillion dollars go now that the Fed is cutting rates?
• 10:44
  Speaker 1: The better question is how long will it take for that trillion dollars to leave money market funds?
• 10:51
  Speaker 1: So from the 1980s through to 2000,.
• 10:54
  Speaker 1: Blah, blah, blah.
• 11:00
  Speaker 1: Let's go through the history here.
• 11:02
  Speaker 1: And then they're saying yeah, last time around 2007, it took two years for fund balances to follow the lower interest rates.
• 11:10
  Speaker 1: Basically, so takeaway it's going to take time years, not months, for capital to leave money market funds and drop into the stock market.
• 11:18
  Speaker 1: And money on the sidelines is always slow to get into the game On the bright side and I said there'd be a bright side here it does eventually see some playing time.
• 11:31
  Speaker 1: So good morning, branko.
• 11:34
  Speaker 1: We are going to see that money come in, but, as I say, it won't happen anytime soon.
• 11:42
  Speaker 1: There's a cat here meowing at me.
• 11:45
  Speaker 1: He's just woken up, so Tallulah.
• 11:47
  Speaker 1: When do you think the trillion dollars is going to flow out of money market funds into the stock market?
• 11:52
  Speaker 1: Have you got a prediction on that?
• 11:54
  Speaker 1: Any prediction on that?
• 11:54
  Speaker 1: What do you think it means?
• 11:56
  Speaker 1: She sits on the right shoulder A year, maybe.
• 11:58
  Speaker 1: Do you think a year?
• 11:59
  Speaker 1: She's not too keen to give away her insight.
• 12:04
  Speaker 1: So, as a cat, she knows a lot of things.
• 12:06
  Speaker 1: Over here is a lot of conversations and so on.
• 12:08
  Speaker 1: So I would say it's probably much more likely that we make a heck of a lot of money trading, which is what we're doing right now up 93% so far this year rather than wait for money market funds to rally the market like that.
• 12:23
  Speaker 1: But they will eventually.
• 12:25
  Speaker 1: So it's something to bear in mind as we go into 2025, and maybe even early 2026, to think well, there is still that trillion dollars on the sidelines.
• 12:35
  Speaker 1: Eventually it'll come into the market, like eventually you will come and join our beginner trading challenge and you'll no longer be afraid of the stock market because you'd understand our risk management rules and you understand how to set up trades and you'll join our mission to make a million of you financially free, which is really what our goal is here.